HR 101: Let’s talk about unlimited PTO

Welcome to HR 101. Class is now in session. Today’s discussion will focus on unlimited paid time-off (PTO).

The history. Policies around time off can be pretty straightforward. Staff have a set number of sick, vacation, and personal days that they can take each year and may increase with their tenure.

Before WWII, PTO was often only available to employees in white-collar jobs, according to research from the Federal Reserve Bank of St. Louis, although 85% of workers who belonged to unions could also count on receiving PTO in 1944.

But employers didn’t start to offer unlimited PTO—which doesn’t accrue and is open-ended, according to Bamboo HR—until the 21st century.

Netflix was an early adopter of unlimited PTO, adopting the policy in 2003, according to Inc. Though the streaming giant initially struggled to manage the influx of employees taking time off, especially during busy periods for the business, its founder and former CEO Reed Hastings told Inc that the company learned from its mistakes and worked out the kinks.

Over the course of the 2010s, some big-name employers, including General Electric, Grubhub, LinkedIn, and Virgin Group, began offering unlimited PTO, according to USA Today, citing culture and work-life balance as factors that contributed to their decision.

Fast-forward. In 2019, only 6% of US employers offered unlimited PTO, according to SHRM data. By 2023, that number had grown ever so slightly, to 8%.

Unlimited PTO has been the topic of debate, with some arguing it does workers more harm than good. Some studies have even found that employees take less time-off when they have unlimited PTO.

But unlimited PTO does have benefits, such as improved employee retention. It’s also cost-effective and can relieve for HR the administrative burden of tracking time-off and ensuring unused days are carried over into the next year, according to SHRM. As a result, it can give HR more time to focus on “more strategic people initiatives,” Emma Brudner, then director of people operations at Lola.com, told SHRM.

Additionally, employees who have access to unlimited PTO are often better at managing their time off, according to SHRM. Without a mad dash to claim unused PTO at the end of the year, HR doesn’t have to worry about departments being understaffed.

Unlimited PTO has more to do with “a parent taking an afternoon off to see her child in a school play, or someone with a chronic illness not having to carefully allocate vacation time so they can go to regular doctor’s checkups,” Brudner told SHRM. “Often, people will be more committed to their jobs when they don’t feel nickel and dimed with time off, especially when that time off represents having to choose between work and taking care of themselves, or fulfilling their other obligations in life.”